Businessmen try to remove head of Kentucky's largest rural electric co-op

SOMERSET — Several businessmen are spearheading an effort to remove the chairman of the state's largest rural electric cooperative, charging that he has acted improperly.

The target of the recall is Rick Stephens of McCreary County, who said he has been on the board of the South Kentucky Rural Electric Cooperative for 36 years and has been chairman for 12.

Opponents began circulating a petition last week that alleges Stephens has engaged in conflicts of interest and malfeasance.

The effort to remove Stephens is unusual. Longtime officials at the state Public Service Commission were not aware of a similar recall petition going back many years, agency spokesman Andrew Melnykovych said Tuesday.

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There are 19 co-ops regulated by the PSC in Kentucky. Most distribute power generated by Winchester-based East Kentucky Power Cooperative.

The examples of alleged wrongdoing by Stephens include that he pressured co-op employees to buy auto parts from a store he owned — after winning a bid to sell parts to the co-op but then raising the prices — and that he had a conflict of interest in relation to co-op property in McCreary County.

The co-op sold an older office to a man with whom Stephens had done business, who then leased the property to Stephens, said Somerset businessman John Tuttle, one of those behind the petition drive.

Another example involves the purchase of land for a new office for the co-op, which is headquartered in Somerset but has more than 66,000 customers in 11 Kentucky counties, as well as a few customers in Tennessee.

The co-op bought 83.6 acres of land in Pulaski County in the spring of 2003 to use for a new office building, paying just over $1 million.

A company called Speculative Ventures had bought the property about four months earlier for $540,000, according to deed records.

The Kentucky Public Service Commission denied South Kentucky's request to build an $18 million office in 2009, saying the price was too high.

The PSC later granted a request for South Kentucky to build a less costly facility, but it has not done so and that certificate has expired, according to state records.

The petition also said that the co-op board has taken retreats that have resulted in excessive or unreasonable expenses while co-op customers are facing higher rates.

The board went to New Orleans last year without senior managers of the co-op, Tuttle said.

Tuttle said the people who want Stephens out are not accusing him of illegal activity. But some board decisions under Stephens don't "pass the smell test," he said.

Stephens said all the decisions cited in the petition were approved by the entire board, not just him.

Stephens said he has done nothing wrong.

"I know that the charges can't be made to stick," he said Tuesday.

Stephens said a committee of the board recommended buying the $1 million site for the new headquarters.

The price went up sharply in a matter of months because of news that a bypass around Somerset would be built nearby, Stephens said.

Stephens, whose term expires in 2015, received $29,177 as chairman of the co-op board last year, according to PSC records.

Somerset lawyer John T. Pruitt Jr., a member of the South Kentucky co-op board, said he's seen no facts to support the allegations.

If he'd been given such facts, Pruitt said, he would have raised the issues with the board or PSC.

Tuttle said the effort to remove Stephens from the South Kentucky RECC board grew out of a concern the board was going to fire Allen Anderson, president and CEO of the co-op.

Anderson has been active in community service, including with the Somerset-Pulaski County Chamber of Commerce and the industrial foundation.

As he and others worked to support Anderson, they began to hear about the allegations cited in the petition and decided to try to remove Stephens, Tuttle said.

Backers must collect the signatures of about 5,000 co-op members to request a special meeting to consider the allegations against Stephens, Tuttle said.